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Permanent link (DOI): https://doi.org/10.7939/R3HH6C61P

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Investment Analysis of Agri-Food Ventures: What Risk Premia are Appropriate? The Silence of the Literature Open Access

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Author or creator
Unterschultz, Jim
Quagrainie, Kwamena K.
Additional contributors
Subject/Keyword
net present value
risk management
agri-food ventures
Type of item
Report
Language
English
Place
Time
Description
Financial principles of project investment analysis with the cost and benefit flows over time. Invariably, the correct future cash flows and exact risks are unknown. The agricultural academic literature devotes substantial energy to discussing the estimation of the cash flows but it is relatively silent on applied estimation of risk. Empirical studies on agri-food ventures have made little or no attempt to estimate appropriate risk adjusted discount rates or other risk measures. Choice of discount rate has been arbitrary. Thus little guidance has been given to practitioners analysing agri-food investments as to the appropriate risk adjusted discount rates. The Capital Market Line provides a relatively straightforward way to calculate risk premiums for project investments by non-diversified investors. These risk premiums can then be used in Net Present Value investment analysis.
Date created
1996
DOI
doi:10.7939/R3HH6C61P
License information
Creative Commons Attribution-Non-Commercial-No Derivatives 3.0 Unported
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